What Le Tote's acquisition of Lord & Taylor could mean for the future of department stores

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What Le Tote's acquisition of Lord & Taylor could mean for the future of department stores

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FILE - In this Oct. 4, 2018, file photo signs advertising the closing of a Lord & Taylor store are displayed in New York, Thursday. Lord & Taylor, one of the nation's oldest department stores, is being sold for Dollar 100 million. The retailer's owner, Hudson's Bay Co., says it reached a deal with online rental clothing company Le Tote Inc. (AP Photo/Seth Wenig, File)

Associated Press

  • After Le Tote's acquisition of Lord & Taylor, some experts are saying such partnerships between struggling department stores and emerging rental and subscription companies could serve as a vital lifeline as the retail apocalypse looms on.
  • "The broader signal it sends is you need to be willing to meet your customers where they are and where they want to consume - whether it's renting, buying online, on mobile, or in-store," Brett Northart, co-founder and president of Le Tote, told Business Insider.
  • However, some are skeptical of the deal and question if it could really turnaround and revitalize a deteriorating traditional brand.
  • Visit Business Insider's homepage for more stories.

If Le Tote's acquisition of Lord & Taylor is any indicator, rental and subscription services might be the light at the end of the tunnel for struggling department stores.

On Wednesday, the seven-year-old San Francisco-based rental company purchased Lord & Taylor in a $75 million deal, with an additional $25 million in the form of a secured promissory note after two years. While the two may seem like an unlikely pairing, Brett Northart, co-founder and president of Le Tote, told Business Insider both stood to gain significantly from the other: Le Tote has an arsenal of digital tools and a young consumer base at its disposal, while Lord & Taylor has nearly two centuries of physical retail experience and history.

"As a startup, you're basically fighting anonymity, so we've gotten very good at going out and acquiring new customers," Northart said. "We felt like we could bring some of our expertise to the table with our tools and technology, bring some of our customers, familiarize them with the brand, and take this from a regional department store to a nationally recognized brand that's on the cutting edge in delivering the future of retail."

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Read more: Lord & Taylor, one of the most iconic department stores in America, is being acquired by a rental clothing company

Reimagining retail

The acquisition announcement also came on the heels of recent efforts from traditional retailers like Macy's and JCPenney's, which are both teaming ThredUp to sell curated assortments of resale apparel in select stores. Jon Beck, CEO of Columbus Consulting, wrote in a statement that these types of partnerships are advantageous in appealing to consumers who are increasingly seeking environmentally friendly ways to buy apparel.

"We believe in the apparel rental subscription business, and this sector of retail has a lot of growth potential," Beck wrote. "It will continue evolve over time as customers and the market matures. Using this model that embraces sustainability, along with a mix of other digital and physical retail strategies, Le Tote and Lord & Taylor can continually deliver on customer expectations and boost shopper loyalty."

However, Beck acknowledged that while Lord & Taylor may be at least immediately out of financial peril, it still has a long way to go and will need to mindful in how it chooses to move forward under Le Tote.

"Driving profitability and sustainability won't be easy," he added. "To be successful, it's critical that the company establishes a consumer-centric supply chain and aligns that to the right balance of assortment."

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A new Lord & Taylor

Northart said he looks forward to bring Le Tote into a physical environment for the first time, noting the benefit of direct-to-consumer brands and e-commerce companies experimenting with brick-and-mortar experiences. Moving forward, he said Le Tote has plans to potentially open additional Lord & Taylor locations and test new iterations and concepts of these spaces.

"The broader signal it sends is you need to be willing to meet your customers where they are and where they want to consume - whether it's renting, buying online, on mobile, or in-store," Northart said. "I think companies need to develop their own point of view that makes sense for their customers."

Paula Rosenblum, co-founder and managing partner at RSR, wrote in a statement that "the deal itself is strange on several levels" and she's hesistant to see how the acquisition will unfold, given that the Lord & Taylor brand has become increasingly devalued in recent years.

"Lord & Taylor has been passed around from owner to owner for years, decaying the brand to the point most consumers, including me, have no idea who they are or what they stand for anymore," wrote Roseblum. "Don't forget, Lord & Taylor is now being sold on Walmart.com."

Carri Bugbee, a consultant at Big Deal Digital, expressed similar skepticism.

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"I predict this will turn out about as well as AOL's purchase of Time Warner," she wrote. "It seemed like a monumental deal at the time, heralding a new era, but where are they now? Clothing rental companies will never be popular with more than a tiny slice of fashionistas. They'll fade a lot quicker than AOL did."



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